12 Paycheck to Paycheck Money-Saving Tips
Living on a shoestring budget is the human definition of a daily challenge. When your monthly income barely covers costs, you can start to feel pretty stretched thin. These situations also most acutely highlight the importance of having savings and an arsenal of money-saving tips. Rarely do you want to save more intently than when living from paycheck to paycheck. While it may seem impossible, there are many ways to turn a trickle of savings into a real nest egg, starting right now.
Even when income is tight, there are many ways to get a small amount socked away each month. With focus, you can soon have enough in a savings account that feels like a rainy day fund, then a safety net, and finally a comfortable nest egg capable of generating a little investment return of its own while you continue to save.
Here are a few of our favorite money-saving tips while living from paycheck to paycheck.
1. Open a Savings Account with a Low Minimum Balance
Start your journey of money-saving tips with a savings account. It's always easier to save when your savings are a separate fund from your checking account. This works for three distinct reasons. The first is practical: a small savings amount is safer in a separate account where it can't be re-absorbed. The second is psychological: we tend to spend as much as we have available to spend. So your savings shouldn't stay in your 'spendable' account fund. Third is that banks will reward your slowly growing savings by investing it for returns, unlike your steadily liquid checking account.
2. Skim the Top of Every Paycheck Into Savings
The best way to save is from the top. Every time you get paid, skim a small amount off that paycheck and drop it directly into savings. This might be $50 or as little as $10 per pay period, but that will stack up more quickly than you realize. If you save from the top every single month, it's the perfect way to make sure that number grows steadily, no matter what else happens.
You can also save with more confidence at the beginning of each budget, where it can be hard to save when the budget starts to feel thin at the end of each cycle.
3. Make Saving into a Game
Challenge yourself to have fun as you follow these money-saving tips. Engage your creativity — and the ingenuity of your family — by making it a game. Set rules and give yourself points for finding new ways to save every week. Get creative, and challenge each other. Feel like you're winning a game when you forego an extra instead of feeling the stress that cost reduction often brings to a household. Then choose enjoyable, cost-effective treats (like the occasional box-mix cake) to reward the saving done by yourself and the family.
4. Save Your Savings
Don't forget to sock away the savings you get from reducing household costs. If you choose to go without a chocolate bar at the cash register, remember to drop that $2.50 into your savings account as a reward for making the smart choice. If you managed to reduce your grocery shopping by $20 from last week, congratulate yourself by putting that $20 directly into your savings.
5. Don't Make Budget Cuts — Make Budget Improvements
Instead of cutting the household budget, improve it. One of the biggest stress factors in trying to build savings is the idea that you're cutting the household budget. If you're already living carefully to stay within budget, you probably don't have many places left to cut.
The key is to make budget improvements. For example, you can't cancel your phone plan. But you can choose a plan that better suits your use patterns, potentially at a lower cost. You can't cut groceries from the budget, but you can refine your ingredient list. You can also often get better deals on subscriptions by being willing to cancel or switch for better prices. More on that, later.
So don't take scissors to your budget thinking about the things you're giving up. Instead, look for savings on things that are already essential. And if you see some unneeded expense, you can cut it without remorse along the way.
6. Pick an Efficient Side Hustle
Some of the most effective money-saving tips are about making more money instead of reducing costs. In the era of remote work and the gig economy, side hustles are no joke. Whatever you're good at, there is probably an industry for it. The trick is to pick something that doesn't cut into your budget or current job income but does turn your free time or hobbies into profit. For example, if you like to drive and have a car, you can be a delivery shopper or offer rideshares. If you do handicrafts, sell them on Etsy. If you can draw, sell your art, and if you can write, there's always a market for ad copy.
Since COVID-19, more roles than ever are going freelance or full-remote positions. This gives you the opportunity to pick up one or more profitable side hustles. Just don't pick anything that adds much cost to your current household budget or adds too much stress.
7. Rethink Groceries and Switch to Simple Ingredients
Groceries are necessary, but it's easy to get into a rut in our shopping that may not be cost-effective. The best way to save at the grocery store is with raw, simple ingredients. Fresh seasonal produce, raw meat from the deli, eggs and dairy, breads, rice, and pastas are all you need for a healthy and complete home diet. Convenient individual packages and pre-cooked foods are always less cost-efficient.
So reach toward simple ingredients and build a recipe menu using these simple ingredients. But a word to the wise: skip the overly fancy internet recipes. If you have to go back to the store for an ingredient, it's not a cost-effective recipe.
8. Prioritize Home Internet Over TV and Phone Plans
The internet can — in most situations — replace the need for television and minimize the need for phone plans. Anywhere with strong wifi can stream TV and act as an internet phone hub. The last thing that makes cells essential is as signal receivers and internet hotspots.
With good enough home internet service, you can fully replace any television plans, and you can minimize your phone plans by conducting more calls from the computer phone. Use some of your monthly savings to improve your home internet service and pocket the rest of your cost-reduction as savings.
9. Switch Utility & Service Provider for Better Plans
The next step in our list of money-saving tips is that you can also renegotiate bills that are often thought of as unchangeable. You can often get a better insurance deal by switching providers or threatening to switch. Diverse utility companies for electricity, water, and gas will compete for your business, which means a better deal if you're ready to switch or walk away from your current provider.
Use this negotiation point to get a more affordable or feature-rich set of plans for the household.
10. Automate Your Bill Payments
Everyone misses the occasional bill payment when handling the bills personally. It's common to have one forgetful weekend or a tough decision at month's end. However, late fees are an unnecessary expense, and there's simply no point in risking it.
Automated bill payment means bills take care of themselves. As long as your budget is ready to cover each payment, then the system takes the worry of getting the bills paid off of you on a personal level.
11. Save Anything Leftover at Month's End
If you've been so efficient at living frugally that there's some money left over at the end of each pay period, sock it into savings. Reward yourself for living below your means by fulfilling the purpose of your frugality: to save the money for something fun later on. Whatever you have at the end of the month, putting it into savings will grow your savings even faster than the skimming method alone.
12. When Your Savings Grow, Invest to See It Grow Bigger
Finally, don't forget to choose an investment savings account with potential returns. As your savings grow, they can be invested (often by the bank) to generate returns over time. The bigger your mass of savings, the more returns it can generate for your benefit. These returns add to your savings amount over time.
Anyone with a monthly income can find ways to save with these money-saving tips, even when you're living paycheck to paycheck. A shoestring budget doesn't have to define your ability to save. Save a small amount each month, and remember to reward your budget reductions with monthly savings. Soon, you'll have a modest savings account and, over time, a fund you can rely on.